SMT. KAMLA DEVISETHIA vs INCOME TAX OFFICER

B.M. Kothari, A.M.

This appeal by the assessee is directed against order dated 5-3-1993 passed by the Deputy Commissioner (Appeals) for assessment year 1991-92.

The assessee has raised as many as 4 grounds but the main ground relates to the confirmation of addition of Rs. 40,152 being unexplained capital, claimed to be belonging to the assessee.

Shri J.K. Ranka, the learned Advocate, appearing on behalf of the assessee explained that the assessee had filed her first return of income for assessment year 1990-91. She derives income from stitching of clothes, weaving and hand art work. The assessing officer has levied tax on opening capital shown by the assessee in the balance sheet. The capital as at the end of the year as per balance sheet furnished by the assessee was Rs. 60,152. The balance sheet as on 31-3-1990 submitted along with return of income for assessment year 1990-91 shows that there was a closing capital of Rs. 39,805. A sum of Rs. 22,147 represent profit derived during the year. Out of aggregate amount of Rs. 61,952, withdrawal of Rs. 1,800 was deducted and a closing balance of Rs. 60,152 was left in the capital account. The assessing officer has held that he will accept capital to the extent of Rs. 20,000 as explained and will treat the remaining amount of Rs. 40,152 as unexplained capital of the assessee.

The learned Deputy Commissioner (Appeals) confirmed the action of the assessing officer.

3.1. Shri Ranka, the learned counsel contended that the lady was doing such work for last 10 years. The assessing officer recorded the statement of the lady. On the basis of her statement, the assessing officer has observed in the assessment order that the maximum income which the assessee could earn from stitching work was Rs. 30 per day only. The learned counsel also pointed out that income from other work done by the assessee has not been estimated by the assessing officer. He pointed out that a fixed deposit of Rs. 10,000 was taken by the assessee on 7-10-1986, which increased to Rs. 15,373 as per the balance sheet as on 31-3-1991. This fixed deposit was taken by the assessee out of money given to her by her motherin-law long back. After excluding this amount, the remaining capital is hardly Rs. 45,000 approximately which a lady of about 42 years of age can very well accumulate over a period of her married life of more than 25 years. He also pointed out that the order for assessment year 1990-91, which was completed under -.. 143(1) has neither been revised nor any action u/s 148 has been taken by the department. Since the opening capital has been accepted by the department by allowing the assessment for assessment year 1990-91 to achieve finality, the assessing officer could not make any addition in respect of opening capital balance in the year under consideration. If any addition out of the amount of opening capital could be made, the assessing officer could make such addition only in assessment year 1990-91 and not in assessment year 1991-92. He strongly urged that the order of the authorities below should be cancelled and the declared income should be accepted.

The learned departmental Representative supported the order of the Deputy Commissioner (Appeals). He pointed out that this is a case of bogus capital formation by the assessee. It is impossible that the ladies of such families will do the work of stitching or preparation of papad, churi etc. Even if such a work is done by ladies of such joint families, they would do it only in the event of family being not able to meet their household expenses out of income of her husband. Therefore, the entire income, if any, was earned by the assessee from stitching work or from the work of preparing churi, papad or doing some art work, that must have been wholly spent by the assessee. The learned Deputy Commissioner (Appeals) has very rightly held that it is not proper to grant judicial sanction to such patently untrue return of income and balance sheet. The action of the assessing officer of taking opening capital along with the declared profit of this year is accordingly upheld. Such findings given by the Deputy Commissioner (Appeals) deserves to be confirmed.

1 have carefully considered the submissions made by the learned representatives of the parties and have perused the orders of the learned departmental authorities.

5.1. The assessee filed her return of income for assessment year 1990-91 and 1991-92 simultaneously on 31-3-1992. The intimation for assessment year 1990-91 was processed u/s 143(1)(a). However, the assessee''s case for assessment year 1991-92 was selected for sample scrutiny. The assessee has not maintained any books of account in respect of her income declared in the aforesaid return of income. The assessing officer recorded her statement on 16-7-1992. She has confirmed in the said Statement that she is doing the work of stitching the clothes and preparing of chun, khata, mango, papad, etc, She is doing such work for the last 10 years. She also stated that her house-hold expenses are borne by her husband. She also gave details of types of clothes stitched by her and the charges obtained from the customers. She has further confirmed that as on 31-3-1991, she owned a fixed deposit and Kisan Vikas Patra, which are verifiable from the balance sheet furnished by her along with the return. A perusal of the said statement indicates that the lady in fact, had done such work of stitching clothes, preparing papad, chun etc. The quantum of income has been estimated by the assessing officer at a lower figure on the basis of the statement given by the lady, which according to the assessing officer can produce income only to the tune of Rs. 30 per day. The assessing officer has not held that the lady did not carry out such work of stitching of clothes and other labour works as claimed in her statement of income. The return of income filed by the assessee for assessment year 1990-91 has been accepted u/s 143(1)(a). Even after completion of the assessment for assessment year 1991-92, the assessing officer has not reopened the assessee''s case by issue of notice u/s 148, nor the Commissioner has taken any action u/s 263 of the Act for assessment year 1990-91. Since the statement of income and balance sheet submitted by the assessee for assessment year 1990-91 has achieved finality, the opening capital of Rs. 39,805 brought forward from assessment year 1990-91 in the year under consideration cannot be subjected to tax in the year under consideration. The remaining credit in the capital a/c for the year under consideration is that of Rs. 22,147 being profit derived by the assessee in the year under consideration from such activities. The assessee has herself offered this amount for tax in t4e year under consideration. There is no other credit in the capital a/c pertaining to the year under consideration. The assessing officer has not made any addition in respect of unexplained investment made in the year under consideration. 1 am, therefore, of the considered opinion that the addition made by the assessee to the declared income is not valid. The assessing officer could not validly make any addition without disturbing the finality of the return for assessment year 1990-91 in accordance with the relevant provisions of the Act. No tax could be levied on the amount of opening capital which is verifiable from the capital account and balance sheet furnished along with the return for the preceding year. The addition made by the assessing officer in the declared income is, therefore, deleted. The assessing officer is directed to accept the declared income.

In the result the appeal is allowed.